economy is boring right now and china may be in a bubble. we welcome back katie nixon, chief investment officer at northern trust wealth management and andrew slimmen, manager director for global investment solutions at morgan stanley. great to have you here together. welcome. katie, we talked to you a little at the end of 2013 and you had made some changes in your tactical allocation at that point. we have now come into a new year that has been a little rough for some investors who were used to a relatively strong and smooth market in 2013. so what are you doing now? >> well, we're sticking to our guns with our overweight to u.s. equities despite the rough start to 2014. it's not unexpected and we are telling our clients to expect a little more volatility this year coming off a year that despite huge gains, was very low volatility. >> andrew, what about you? we talked last time about earnings. take a look at the numbers, take a look at the bottom line results for these companies, and we're in the heart of earnings season right now. what do

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no interest rates to cut to stimulate the economy. just quantitative easing. >> sarah, speak to me about the experience of japanese officials? they've been trying to right the ship from deflation for, as we said, about 20, 25 years. >> exhibit a, sue, of why central bankers are so afraid of deflation. why it's enemy number one. christine lagarde called it the ogre. look long term since the mid-90s, japan suffering from slow economic growth. that gdp chart not showing much strength, and low prices. namely, deflation. you've seen that impact corporate profits in japan. seen it impact everything from wages, consumer behavior. that's why abe nomices is getting attention and traction. got, stimulate inflation, wake the consumers up and signs it's starting to happen. look how long it's taken and how many guns, the bank of japan, had to pull out to try to fight it? >> absolutely. steve, speak to that. what tools would the fed have or what, better said, could be the most effective tool, if any, the fed had, if, indeed, we started to suffer fr

we have been avoiding emerging markets, but that economy seems to be stabilizing and we are looking for opportunities there. >> obviously, all portfolios are different, individuals are different, but what is your baseline portfolio mix for a typical client in your practice? >> of course, the tough question is there is what is my typical client. i'm not sure i have one. you know -- >> that's a given. you know what i'm asking. do you typically start at 55%, 60%, what? >> i would say somewhere between the 40% and 60% would certainly be a range where i would want to be in equities. very often closer to 70% depending on the age, depending on the client's circumstances and so forth. >> diane, what do you tell investors who are, you know, there's an awful lot of concern that people were not getting back into the equity markets quickly enough. what do you tell them about breaking their fear of losing money in stocks? >> the bottom line is the people who stayed out of the market from 2008 are the ones that got hurt the most. so what we try to do is over time, you reallocate, you rebalance, you t

the slowing economy is of course one reason, but a bigger worry is that the chinese rich are simply taking their money and themselves to other countries. 64% of chinese millionaires have either emigrated or have plans to emigrate. a third of the chinese super rich, people worth $60 million or more, have already left. bentley motors last week blaming its slower sales last year in part on quote, the migration of high net worth individuals from china. so where are the rich chinese going? the u.s., luckily for us, is their top destination. we can see that with real estate sales in seattle, san francisco, here in new york. they are also going to europe, canada and australia. so the chinese are still buying, but the rich are buying their bentleys in seattle rather than shanghai. >> fleeing is believing, i guess. why are they leaving? what are they afraid of? >> this is the key question. some say they are just diversifying their risk. they want more overseas exposure. everyone off the record tells me they are worried about the government crackdowns on corruption and any kind of claw-backs where t

. >> the economy, usis, a government contractor spun off from the federal government itself back in the 1990s. what they do is a lot of the background checks for these security positions that contractors and members mp the federal government get. now the department of justice is alleging they were in some cases fraudulently sending along background investigations that hadn't been completed as if they had. s am as 660,000 of those ever a multiyear period. and although edward snowden and also the u.s. navyyard shooter who was also vetted at one point by usis were not mentioned ex-sples italy in the actions, there are problems for the company in terms of these e-mails. look at some of the e-mails that have surfaced in the investigation. talking about flushing bad data to the u.s. government. shelves as clean as they could get. flushed everything like a dead goldfish reads one internal usis e-mail. we talked to the company who said these allegations relate to a small group of individuals over a specific time period and are ichb consistent with the strong service record we earned since insne